How the Premium of Used Car Insurance Varies?

Inderpal Ahluwalia 21 September 2017

4.8 (5 votes)

As they say, nothing comes for free and everything has a price on it! Similarly, every car insurance comes for a cost, i.e. a premium. However, the car insurance premium for a used car would differ with every case. Let us highlight the factors which have an impact on your used car insurance.

It's a no-brainer to debate on having a car insurance policy. As we know, a car insurance is not only mandatory as per Indian law but also acts as a saviour during the time of the crisis. It not only protects your car from accidental damage or calamity but also has driver’s protection cover. No premium calculation of used car insurance is the same as each and every case comes with a different criteria and condition. Let’s have a look at the factors that make the premium payable of a used car vary for each case.

IDV (Insured Declared Value)

IDV is the present market value of your vehicle. IDV refers to the highest sum payable by the insurer for a motor insurance policy. It is thus the maximum amount you can claim in case of total loss of your vehicle, or in case it gets stolen or damaged beyond repair, within the policy period. For instance, if you buy a new Maruti Swift car for Rs. 6 lakhs. As the years go by, the market value of the car will depreciate. Say after a couple of years the market value of the swift depreciates by Rs.2 lakhs and when you renew your used car insurance the IDV will come down to Rs. 4lakh. This Rs.4 lakh is the maximum amount the insurance company will compensate you if there is a claim made during the policy term period. If you buy the policy online then you have an option to choose your car’s IDV. Higher the IDV, higher will the insurance premium payable and older the car the lesser will the insurance premium payable.

Types of Coverage

Premium variation also depends on the coverage and benefits offered by the car insurance policy. Comprehensive insurance provides extensive coverage and offers more services than the third party insurance. Third party insurance does not cover your own vehicle against a possibility of an accident. With better coverage, comprehensive car insurance works out costlier than the third-party car insurance.

Location

Location plays an important role in deciding your car insurance premium. If your location has a lot of claims due to theft or natural calamities then insurance premium will get affected. As traffic density is higher in metro cities they are prone to accidents and thus attract higher premiums.

No Claim Bonus (NCB)

No claim bonus is the incentive given by the insurance for not making claim in a year. It accumulates for consecutive years of not making any claim. If you do make a claim then you lose on the NCB and end up paying higher premium next year. If you do not make any claim then next year you will be eligible for no claim bonus and your insurance premium might reduce from the previous year.

Fuel type

Just as the engine of the car is an important factor, similarly the fuel used in the car is also an important factor in deciding insurance premium. Compared to petrol/diesel you may have to pay a higher premium for installing a CNG cylinder in your car.

Usage of the vehicle

Vehicles are used for personal or commercial use. Commercial usage of vehicle attracts a higher insurance as usage and wear and tear of the vehicle is more. Hence, the premium charged for personal and commercial vehicle insurance policies are different.

Add-on Covers

Add-on covers come with an extra cost and can be attached to the base policy to enhance coverage. The more add on covers you select the dearer will the premium payable. So, if you have a very old car then you can take your decision accordingly if a particular add-on cover is worth your increase in the premium payable.

Vehicle model

The manufacturer of your car is another feature that can decide your premium. Insurance companies decide on the premium depending upon the ratio of claims made by different brands. The class of your vehicle matters too. A luxury SUV would comparatively have a higher premium than a hatchback or mid-size sedan.

Safety features

Safety equipment can help you avail a discount or lower the premium on used car insurance, for instance, if you have an anti-theft system or car lock few insurers may offer your concession in premium. You need to ensure that the safety devices installed in your car fall under the list provided by the Automobile Research Association of India (ARAI).

Own damage discount

Own damage discount is offered by the insurer based on the risk exposure experience. Based on the above factors premium of used car insurance varies. So, next when your insurance premium gets calculated you will have a better understanding of the reasons behind it. You can make changes as per your requirement and get a better deal on used car insurance.

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